Analysis of Purchasing Power Parity: Empirical evidence between Mexico and the United States

  • Mario Gómez Aguirre Universidad Michoacana de San Nicolás de Hidalgo
  • José Carlos Rodríguez Chávez Universidad Michoacana de San Nicolás de Hidalgo
Keywords: purchasing power parity, exchange rate, structural change, prices, causality
JEL Classification: F31, E31, C20

Abstract

This paper analyzes evidence on Purchasing Power Parity between Mexico and the United States, as well as the causal link between relative prices and exchange rate (1957-2010). We use a unit root test that allows for two structural changes and two tests of causality. The results indicate that the PPP between Mexico and the United States is validated, reflecting the integration and price convergence of the two economies to a very rapid rate. In addition, the exchange rate follows the behavior of relative prices of both countries.

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Published
01-01-2012
How to Cite
Gómez AguirreM., & Rodríguez ChávezJ. (2012). Analysis of Purchasing Power Parity: Empirical evidence between Mexico and the United States. Estudios Económicos, 27(1), 169-207. https://doi.org/10.24201/ee.v27i1.92
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